When Joe Biden entered the White House as vice president, the U.S. economy was in recession. Job losses were rising. Stocks were falling apart. Millions of Americans were at an early stage of losing their homes to closure as the housing bubble woke up.
Biden returns to the White House as president twelve years later with the economy hit and shaken by a pandemic. But this time is different – and it could reshape the country ‘s politics if Biden and Democrats can count on a growth rate not seen in a generation.
Despite the 9.8 million jobs lost as a result of the coronavirus, there are signs that the country is on the verge of a kind of unprecedented upheaval in the times of President Barack Obama and Donald Trump.
The balance of audited accounts has risen by $ 2.4 trillion since the beginning of the revolution. Home prices are rising sharply due to hot demand. And each additional vaccine will move the world’s largest economy closer to full opening.
“If the economy improves significantly in the spring or early summer, that could help Biden do more of his agenda… because success can lead to success,” he said. Jason Furman, a former senior economist for the Obama administration, noted the growth potential of paving the way for an infrastructure and climate investment program.
Members of the U.S. Air Force Guard of Honor will walk in front of the U.S. Capitol, the site where President Joe Biden is sworn in during his first 59th inauguration Wednesday [File: Andrew Harnik/AP Photo]
But hanging over any effort to stimulate the economy is the enduring partisan division that contributed to the deadly attack on the U.S. Capitol last month when the influence of Biden Electoral College was confirmed. Politics is increasingly shaping how Americans feel about the economy, eroding the political incentives for lawyers to cooperate.
There are also concerns about whether the pandemic and the slow pace of vaccinations to date have reduced worsening coronavirus complications that could hurt economic recovery.
The potential has risen sharply to around $ 4 trillion agreed so far in federal support, with Biden last week proposing an additional $ 1.9 trillion, an unprecedented level of stimulus. The extra money, which must be approved by Congress, is for accelerating the spread of the vaccine, reopening schools and reducing the level of child poverty to a historic level.
Investment bank Goldman Sachs estimates that growth this year could be at 6.6 percent if part of Biden’s incentive plan passes.
That was the strongest gain since 1984, when a 7.2 percent increase in gross domestic product helped push Republican President Ronald Reagan to a second term in a landslide. Wells Fargo is forecasting growth of 4.6 percent this year, which would have been better since 1999.
However, Biden faces many economic risks. The most bullish forecasts depend on getting a lot of Biden aid package through Congress. And any benefit would depend on overcoming the pandemic. There is also the possibility that the additional stimulus put forward by Biden may outweigh the need for the economy, possibly shifting inflation.
Unemployment numbers rise as COVID-19 infections rise again in large parts of the country [File: Kevin Lamarque/Reuters]
But the Great Depression taught Biden’s team the benefit of going big with motivation. Incoming White House Chief of Staff Ron Klain says Biden officials learned the hard way the approximately $ 800bn in 2009 did not agree to fight the Recession Big, mistake they are not willing to make again this time.
“It wasn’t big enough,” Klain said Friday at a lively Washington Post event. “Our recovery went down as a result.”
In the first nine months of Obama’s presidency, the unemployment rate rose to 10 percent and the expected rapid recovery never occurred as the country spent years working through housing protests and rebuilding its financial system.
This led Obama administration officials to argue that the economy would have worsened without the stimulus. Republicans have rebuffed the bid for control of the House in the 2010 midterm elections.
“There is little doubt that the economy improved in 2009 and 2010 as a result of the recovery act,” said Douglas Elmendorf, who was director of the Congressional Budget Office at the time and is now dean of Harvard University’s Kennedy School. “It simply came to our notice then [stronger growth] as a sign that the stimulus did not work, when, in fact, the economy was worse off than was widely understood. “
Biden can count on support from Wall Street investors this time around to get a loan. With the help of supportive federal back-up policies, low interest rates make it easier to finance incentives and repay additional debt.
The interest rate on the 10-year U.S. Treasury pound is around 1.15 percent, compared to 11.67 percent in 1984 when growth was finally expected to be as good as this and the amount of federal debt was significantly smaller.
Republican lawmakers still see the need for more help to keep the pandemic afloat, but some are concerned about Biden ‘s desire for another major spending package. They stress that any new spending should be directed toward increased vaccinations and that Biden ‘s recommendation for just $ 1,400 per person checks could delay people returning to work. .
As President Joe Biden and Vice President Kamala Harris prepare for swearing in, the U.S. has a party split that colors everything, including how Americans view the economy [File: Alex Brandon/AP Photo]
“Exploding another $ 2 trillion in borrowed or printed money – when the ink on a $ 1 trillion aid bill in December is barely dry and not much of the money has been spent yet – would be a waste large and economically harmful, “Republican Senator Pat Toomey of Pennsylvania said in a statement.
Republican voters have already turned a bearish turn on the economy after Trump lost the election. The University of Michigan reported Friday that its index of consumer expectations among Republicans was falling from a reading of 96 in October to 53 in January. That could undermine the willingness to spend and encourage Republican lawmakers to blame Democrats for any economic issues.
For now, Biden’s team hopes to push through her Republican-backed stimulus in the Senate. But political tensions could force many of his campaigns to continue – such as a minimum wage of $ 15 an hour and tax increases on corporations and wealthy people – with just Democratic support.
If a Republican regains control in Congress, any policies approved by Democratic support could be quickly reversed or allowed to lapse. This rift between controversial policies could erode the level of certainty that businesses and consumers need to make investments that will drive growth, said Donald Schneider, a member of Cornerstone Macro’s policy research team and former chief economist at Cornerstone Macro. Roads and Housing Procedure Committee.
“It’s a big problem going forward if one side comes to power and makes changes and then the other side comes to power and it pushes them back and forth and back,” said Schneider.